Tax-saving fixed deposits (FDs) are among the savings options that offer income tax benefits under Section 80C. The maturity period of a tax-saver FD is 5 years. Premature withdrawal cannot be done in tax-saving FDs. On the other hand, the post office 5-year National Savings Certificate (NSC) also offers benefit of income tax deduction on investment. The interest rate of banks may change anytime but in case of NSC, the rates are set by the government. The government has been revising interest rates on small savings schemes on a quarterly basis. However, once invested in either of the two, the interest rate is locked for the entire tenure.
Income tax-saving fixed deposits (FDs)
Income tax-saving FDs are considered to be less risky compared to equities. An investor can claim deduction up to Rs1.5 lakh by investing in these tax-saving FDs. The interest earned from tax-saver FDs is taxable.
Income tax-saving FDs interest rate
Currently, the average interest rate on 5-year tax saving FD in most leading banks is in the range of 5.3% to 6.75%. Senior citizens get an additional interest rate of 50 basis points (bps) over and above the others.
SBI's tax-saving FD will give 5.4%
ICICI Bank's tax-saving FD will give 5.50%
HDFC Bank's tax-saving FD will give 5.50%
Axis Bank's tax-saving FD will give 5.50%
Canara Bank's tax-saving FD will give 5.30%
IDFC First Bank tax-saving FD will give 6.75%
PNB tax-saving FD will give 5.30 %
Bank of Baroda tax-saving FD will give 5.30%
National Savings Certificate (NSC)
NSC is a popular small-savings instrument. NSCs have a maturity period of five years. The interest rate of small savings schemes are revised on a quarterly basis but on NSC the interest rate as applicable at the time of investment remain the same throughout the tenure of the investment. In case of NSC, the interest is not paid to the investor each year but it accumulates. Investment in NSC up to ₹1.5 lakh a year under Section 80C qualifies for tax deduction.
NSC interest rate
The post office 5-year National Savings Certificate (NSC) is offering 6.8%
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